A pharmacy cannot go unreimbursed for medicine simply because an employer paying the workers’ compensation benefits decides the medicine is unnecessary, the Commonwealth Court has ruled.

In a precedential opinion Aug. 7, a three-judge panel of the Commonwealth Court vacated an order from the Bureau of Workers’ Compensation on a fee review for Mark Kraayenbrink’s topical back pain medication. His employer, Cabinet Transport Inc., had refused to pay more than $6,600 for the medicine, owed to Armour Pharmacy, and had executed a new compromise and release agreement for that purpose.

“A [compromise and release] agreement, to which a provider is not a party, cannot be used to deprive a provider of the review procedures and excuse the employer from paying the provider,” President Judge Mary Hannah Leavitt wrote. “To do so would violate the [Workers' Compensation] Act and due process.”

Kraayenbrink injured his back on the job in 1999, so Cabinet Transport has paid for his medical treatment since 2000 under a compromise and release agreement. In 2015, the employer requested a utilization review about Kraayenbrink’s topical medication. The review found that the medication was reasonable and necessary to treat the injury, Leavitt’s opinion said.

But in 2016, when Cabinet Transport refused to pay Armour Pharmacy for the medicine, the employer argued that the medicine was not reasonable or necessary. And the employer alleged that the prescribing doctor, Jason Bundy, had a financial interest in the pharmacy, making the prescription “an unlawful ‘self-referral,’” Leavitt wrote.

At a hearing in November 2016, Cabinet Transport presented a copy of a new compromise and release agreement, which was created three months after the employer was ordered to pay the $6,644 owed to Armour, according to the opinion. The new agreement, which a workers’ compensation judge had approved in October 2016, said no past, present or future benefits would be paid for any compounded prescription cream.

The pharmacy, however, argued that it was not a party to the agreement, which was executed long after the medication was dispensed to Kraayenbrink.

The court’s opinion said Cabinet Transport gave a false reason for refusing to pay for the medicine, since the utilization review had found it to be necessary for treatment.

“However, there is no evidence that Dr. Bundy has a financial interest in [the] pharmacy, and there has not been a legal determination that this financial relationship, if it exists, violates the [Workers' Compensation] Act.”

Leavitt wrote that the U.S. Constitution requires notice and an opportunity to be heard before property rights can be taken—in this case, from the pharmacy.

“A C&R agreement cannot be employed to avoid the procedures in the act for challenging a provider’s invoice or a fee review determination that the invoice must be paid,” the judge said.

Lawyer Daniel Siegel, who represented Armour Pharmacy, said a lot of medical providers come across similar issues and often do not take the time and resources to fight them in court.

“It’s the first opinion in Pennsylvania that addresses and affirms that medical providers have due process rights within the workers’ compensation system in order to protect their right to be paid for services,” Siegel said. “It also assures that where they have existing rights, that parties to proceedings cannot eliminate those rights without notice.”

James Andrzejewski, who represented National Fire Insurance Co. of Hartford, declined to comment on the opinion.